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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended MARCH 31, 1997
Commission File Number 2-94725
REAL AMERICAN PROPERTIES
(A California Limited Partnership)
I.R.S. Employer Identification No. 95-3906164
9090 WILSHIRE BLVD., SUITE 201
BEVERLY HILLS, CALIF. 90211
Registrant's Telephone Number,
Including Area Code (310) 278-2191
Indicate by check mark whether the registrant (1) has filed all documents and
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, March 31, 1997 and December 31, 1996..............................................1
Statements of Operations,
Three Months Ended March 31, 1997 and 1996................................................2
Statement of Partners' Equity (Deficiency),
Three Months Ended March 31, 1997.........................................................3
Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996...............................................4
Notes to Financial Statements.....................................................................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .......................................................11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................................................12
Item 6. Exhibits and Reports on Form 8-K ...............................................................12
Signatures ..............................................................................................13
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
ASSETS
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1997 1996
(Unaudited) (Audited)
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ASSETS (Note 1) $ - $ -
=========== ==========
LIABILITIES AND PARTNERS' EQUITY
----------- ----------
LIABILITIES - -
----------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 4)
PARTNERS' EQUITY - -
----------- ----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ - $ -
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
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1997 1996
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RENTAL OPERATIONS:
Revenues
Rental income $ - $ 183,600
Other income - 5,378
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- 188,978
--------- ---------
Expenses
Operating expenses - 125,400
Management fees (Note 3) - 6,614
Depreciation - 34,872
General and administrative expenses - 9,969
Interest expense - 231,189
--------- ---------
- 408,044
--------- ---------
Loss from rental operations - (219,066)
--------- ---------
PARTNERSHIPS OPERATIONS:
Interest income - 95,360
--------- ---------
Expenses
General and administrative expenses - 58,168
Professional fees - 67,481
--------- ---------
- 125,649
--------- ---------
Loss from partnership operations - (30,289)
--------- ---------
NET LOSS $ - $(249,355)
========= =========
NET LOSS PER LIMITED PARTNERSHIP
INTEREST (Note 1) $ - $ (12)
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF PARTNERS' EQUITY (DEFICIENCY)
THREE MONTHS ENDED MARCH 31, 1997
(Unaudited)
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General Limited
Partners Partners Total
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PARTNERSHIP INTERESTS,
March 31, 1997 1 21,500 21,501
======== ========== =======
EQUITY (DEFICIENCY), January 1, 1996 $ - $ - $ -
Net loss for the three months
ended March 31, 1997 - - -
-------- ---------- -------
EQUITY (DEFICIENCY), March 31, 1997 $ - $ - $ -
======== ========== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
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1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ - $(249,355)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation - 34,872
Changes in operating assets and liabilities:
Decrease in:
Due from affiliated rental agent - (3,439)
Other receivables and prepaid expenses - (58,351)
Increase in:
Accounts payable and accrued expenses - 88,551
Accrued interest payable - 146,421
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Net cash used in operating activities - (41,301)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash - 5,191
Decrease in liability for earthquake loss - (5,191)
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Net cash used in investing activities - -
------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgage notes - (9,290)
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NET DECREASE IN CASH
AND CASH EQUIVALENTS - (50,591)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD - 442,803
------- ---------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ - $ 392,212
======= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for interest $ - $ 56,446
======= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The information contained in the following notes to the
financial statements is condensed from that which would appear
in the annual audited financial statements; accordingly, the
financial statements included herein should be reviewed in
conjunction with the financial statements and related notes
thereto contained in the annual report for the year ended
December 31, 1996 of REAL American Properties (the
"Partnership"). Accounting measurements at interim dates
inherently involve greater reliance on estimates than at year
end. The results of operations for the interim periods
presented are not necessarily indicative of the results for the
entire year.
In the opinion of NAPICO, the accompanying unaudited financial
statements contain all adjustments (consisting primarily of
normal recurring accruals) necessary to present fairly the
financial position of the Partnership as of March 31, 1997, and
the results of operations and changes in cash flows for the
three months then ended.
ORGANIZATION
The Partnership was formed under the California Limited
Partnership Act on March 9, 1984. The general partners are
National Partnership Investments Corp. ("NAPICO"), a California
corporation, and Real Estate Services XIII Inc., a Delaware
corporation. Casden Investment Corporation owns 100 percent of
NAPICO's stock. LB I Group Inc. owns 100 percent of the stock
of Real Estate Services XIII Inc. The Partnership was formed to
invest in a diversified portfolio of apartment complexes.
The Partnership offered 45,000 limited partnership interests
("Units") at $1,000 each, of which 21,500 were sold through a
public offering. The terms of the Partnership's Amended and
Restated Certificate and Agreement of Limited Partnership (the
"Partnership Agreement") provide, among other things, for
allocation to the partners of profits, losses and any special
allocations with respect thereto. Under the terms of the
Partnership Agreement, cash available for distribution is
allocated 90 percent to the limited partners as a group and 10
percent to the general partners.
The Partnership originally invested in five apartment
buildings. Two of such buildings were contributed to a separate
limited partnership in exchange for a subordinated limited
partner interest therein, which, in turn, exchanged the
buildings for an interest in a publicly traded Real Estate
Investment Trust ("REIT"). The Partnership sold the REIT stock
it received as a result of that exchange in November 1996 for
$890,371. One building was foreclosed upon by the lender in
June 1993 and one building was substantially destroyed in the
January 17, 1994 earthquake in the Los Angeles area and was
sold in May 1996. The other building was sold in April 1996.
Distributions of $2,823,700 were paid to the limited partners
during 1996. Accordingly, since the Partnership's primary
assets at December 31, 1996 consisted of cash of approximately
$345,000 and certain short-term receivables and other claims,
the Partnership was dissolved effective December 31, 1996.
5
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NAPICO was appointed the liquidation agent for the Partnership pursuant
to a Liquidation Agreement, made as of December 1, 1996, among the
Partnership, NAPICO, and RES XIII. Under the terms of the Liquidation
Agreement, the liquidation agent will pursue collection of the
Partnership's outstanding receivables and other non-liquid assets and,
subject to the approval of RES XIII, cause the Partnership's final tax
returns and reports to be filed. Upon collection and liquidation of the
Partnership's remaining assets, the liquidation agent will cause the
final distribution(s) to be paid to the partners in accordance with the
terms of the Amended and Restated Agreement of Limited Partnership of
the Partnership. The liquidation agent shall be entitled to (a) utilize
its reasonable discretion in liquidating the Partnership's remaining
assets and (b) reimbursement for all reasonable costs and expenses
incurred in conforming its duties under the Liquidation Agreement. As of
December 31, 1996, the Partnership's remaining assets consisted of cash
of approximately $345,000 and certain short-term receivables and other
claims, and its remaining liabilities consisted of approximately
$112,000 of accounts payable. The Partnership's remaining assets and
liabilities were assigned to NAPICO as the liquidation agent under the
Liquidation Agreement, and were reflected as a net distribution of
approximately $233,000 to the limited partners, which is due from
NAPICO, subject to the payment of costs and expenses of the liquidation.
During the three months ended March 31, 1997, NAPICO incurred net
expenses of 19,306 on behalf of the Partnership.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
RENTAL PROPERTY AND DEPRECIATION
There are no remaining rental properties owned by the Partnership,
therefore no rental property cost and accumulated depreciation are
included in the March 31, 1997 and December 31, 1996 financial
statements.
NET LOSS PER LIMITED PARTNERSHIP INTEREST
Net loss per limited partnership interest was computed by dividing the
limited partners' share of net loss by 21,500, the number of limited
partnership interests outstanding for the periods presented.
6
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
The Partnership adopted Statement of Financial Accounting Standards No.
121, Accounting for the Improvement of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of as of January 1, 1996 without a
significant effect on its financial statements. The Partnership reviews
long-lived assets to determine if there has been any permanent
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. If the sum of the
expected future cash flows is less than the carrying amount of the
assets, the Partnership recognizes an impairment loss.
NOTE 2 - INCOME TAXES
No provision has been made for income taxes in the accompanying
financial statements as such taxes, if any, are the liability of the
individual partners.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Partnership had entered into agreements with an affiliate of NAPICO
to manage the operations of the West Colonial and Northridge rental
properties owned by the Partnership. The agreements changed to a
month-to-month basis and provided, among other things, for a management
fee equal to 5% of gross revenue for West Colonial through July 23, 1995
and approximately $2,450 per month for the Northridge property through
the date of sale. Management fees charged by the NAPICO affiliate under
these agreements were approximately $7,400 for the three months ended
March 31, 1997. On July 24, 1995, management of West Colonial was
transferred to an independent property management firm. The management
agreement was on a month-to-month basis and provided for a management
fee of 3.5% of gross revenue, equal to $6,614 for the three months ended
March 31, 1997.
NOTE 4 - CONTINGENCIES
NAPICO is involved in various lawsuits arising from transactions in the
ordinary course of business. In the opinion of NAPICO, the claims will
not result in any material liability to the Partnership.
7
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND
RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
The Partnership received a total of $10,750,000 in subscriptions for units of
limited partnership interests (at $1,000 per unit) during the period September
12, 1985 to February 28, 1986, pursuant to a registration statement on Form
S-11. $10,750,000 in subscriptions were received pursuant to the exercise of
warrants and the sale of additional limited partnership interests from April 1,
1986 to May 31, 1986.
The Partnership's primary sources of funds are income from rental operations and
interest income on money market funds and certificates of deposit.
The Partnership acquired five apartment complexes since inception, one of which
was foreclosed by the lender in 1993. In 1992, two of the Partnership's
properties (the Del Coronado Properties) were contributed to 843 South Longmore
Limited Partnership, an unaffiliated limited partnership, and such buildings
were thereafter sold by said partnership for REIT shares in August of 1995. The
remaining two apartment complexes of West Colonial and Northridge were sold in
1996,
In August 1995, the Del Coronado properties were sold by 843 South Longmore
Limited Partnership to a publicly held Real Estate Investment Trust ("REIT").
The net proceeds of $5,682,262 paid to 843 South Longmore Limited Partnership
was in the form of limited partnership interests in the operating partnership
controlled by the REIT. Of the net proceeds, the Partnership received an
allocation equivalent to 23,524 shares, which were converted to REIT stock. The
Partnership sold the REIT stock in November 1996 for $891,000 and recognized a
gain in that amount because the investment was being carried at a zero balance.
RESULTS OF OPERATIONS
Rental operations consisted primarily of rental income and depreciation expense,
debt service, and normal operating expenses to maintain the properties.
Depreciation was provided on the straight-line method over the estimated useful
lives of the buildings and equipment. Substantially all of the rental units were
leased on a month-to-month basis.
Partnership operations consisted primarily of interest income earned on
certificates of deposit and other temporary investment of funds. Operating
expenses of the Partnership consist substantially of recurring general and
administrative expenses and professional fees for services rendered to the
Partnership.
8
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1997
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
NAPICO is involved in various lawsuits. None of these suits were related to the
Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are required per the provision of item 601 of
regulation S-K
9
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REAL AMERICAN PROPERTIES
(a California limited partnership)
By: National Partnership Investments Corp.
a General Partner
By:
--------------------------------------------
Bruce Nelson
President
Date:
------------------------------------------
By:
--------------------------------------------
Shawn Horwitz
Executive Vice President and
Chief Financial Officer
Date:
------------------------------------------
10
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
PARTNERSHIP'S STATEMENTS OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
